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Drapers Investigates: Retail’s long road to recovery

As millions of the UK’s workforce are forced to sit at home as part of the effort to curb the spread of the coronavirus, it is difficult to imagine a return to pre-lockdown times.

The government announced last week that the UK is to remain in lockdown until at least 7 May, and so it still remains unclear when many businesses will be able to resume trading, or what that might look like.

However, Drapers’ latest research makes one thing clear: even once we are through this crisis, business will not just bounce back to normal.

Long-term effects

As part of an ongoing investigative series into Covid-19’s impact on fashion retail businesses, Drapers conducted a second survey of the UK and Irish industry to find out how it is handling and responding to the government lockdown – and what the future of retail will look like. The survey was open to fashion-based businesses from across the UK and Ireland, and received 178 responses between 25 March and 12 April.

More than one-third of respondents (36%) believe it will take six months to a year for their business to fully recover from the coronavirus crisis, while 34% say one to two years, 16% say up to six months and 11% say between two and three years (graph, opposite). Only 1% believe they will recover immediately, and 1% say it will take more than three years.

Professional services firm Alvarez & Marsal, which is advising struggling lifestyle retailer Cath Kidston, and economist Retail Economics, described the recovery timeframe for retailers as “uncertain”, in their report, Surviving the Cash Crunch: The Impact of COVID-19 on the UK Retail Industry, published earlier this month.

It says: “Assumptions concerning the timeframe for recovery are highly debatable, and dependent upon the duration and trajectory of the pandemic.

“Given the significant shock to the economy in the second quarter of 2020, the prospect for a retail recovery in the second half of the year is highly dependent on the effectiveness of government policy, whether any additional measures will be announced to further support businesses and households, and the duration of the pandemic.

“Until further clarity emerges on when the outbreak will end, the longer-term scale of the negative economic impact remains uncertain and very difficult to quantify.”

Those who focus on what they stand for will be the quickest to assume leading positions

Clare Kennedy, AlixPartners

Clare Kennedy, director at consulting firm AlixPartners, concurs: “In terms of duration, it is of course incredibly hard to predict, given the volatility of the situation. What we can say with some confidence, though, is that those who achieve the balancing act and focus on what they stand for, how they engage with customers and the viability of their operating model will be the quickest to assume leading positions, whatever the new commercial environment looks like.”

The CEO of one womenswear retailer, who is also a turnaround expert, predicts that most businesses will recover by March 2021: “The retailers that recover will have worked with brands that support them in one way or another, and are well financed enough to stay afloat.

“Those that survive will probably have their business structures sorted out and their sources of supply in place for the second half of spring 21. I can’t see ‘normality’ [returning] until then.”

Eventual recovery

Encouragingly, almost all of our survey participants expect their business to eventually recover from the crisis. Nearly three-quarters (68%) say they would “to some extent”, 27% said “yes, fully”, and just 5% said theirs would not.

Kennedy tells Drapers: “We consider that the 68% of respondents in the camp of ‘to some extent’ hold a realistic view. What remains to be seen is quite how ‘some extent’ ultimately defines itself. What is true, though, is that, just as before the crisis, well-run retailers with a constant focus on operational efficiency, who engage with customers via both their brand and purpose, and who constantly leverage data and technology stand the greatest chance of success.

Retailers must start planning a recovery strategy for each country they operate in

Honor Strachan, GlobalData

“The incredibly hard balancing act that retailers hoping to emerge intact and relevant for the new environment have to achieve involves dealing with the ‘now’ but also looking ahead to the ‘then’.

“The decisions and actions that retailers make now to manage the short term will be judged by all their stakeholder groups, and will determine long-term success. This applies to employees, supply partners, landlords, lenders and, ultimately, customers.”

Honor Strachan, principal analyst at research consultancy GlobalData, argues that immediate action is vital: “Retailers must start planning a recovery strategy for each country they operate in, taking into account consumer sentiment and confidence, the country’s financial stability, consumer propensity to spend on fashion, online penetration, and the time in the season and promotional calendar. All of these factors will impact how and when physical stores should reopen.”

Richard Fleming, managing director and head of restructuring, Europe, at Alvarez & Marsal, agrees: “The next few weeks will be critical. Retailers need to ask themselves tough questions and take steps to address underlying operational issues while they still have the chance.”

However, several survey respondents have called for the government to help fashion retail businesses with plans for how to proceed after the lockdown, and for long-term survival.

“The government needs to put a plan in place for retail recovery after the lockdown,” the director of one London-based shoemaker says.

The co-founder of one Scottish independent retailer agrees: “There needs to be some clear, specific guidance and consideration on what the long-term plan of action for businesses is.

“There are so many conflicting comments coming from the government [about what are considered non-essential operations and who can apply for money].”

Tom Ironside, director of business and regulation at the British Retail Consortium, concludes: “Drapers’ second survey highlights the need for continued support from the UK government in the coming weeks and months.

“The one-year respite from business rates and the Coronavirus Job Retention Scheme have both been essential moves by government to protect jobs and livelihoods, but they will need to be supplemented by meaningful measures to support tenants if many firms are to survive.”

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